ABERDEEN, SCOTLAND – The Suez Canal traffic jam is easing. The Ever Given is free at last, and not only of its recently earned nickname the “Never Given Way”…
In recent issues of this letter (Beached in particular) we’ve pondered how fragile the supply of goods we take for granted really is. When a single ship like the Ever Given can halt a vast tranche of global trade, leaving hundreds of vessels “dead in the water” just by taking a wrong turn… one wonders how quickly our supply of certain goods would dry up if there was a deliberate and well co-ordinated effort to cause such chaos on a larger scale.
Further to that, I’d like to share a recent piece by my colleague Kit Winder. Kit’s main focus in recent years has been the topic of green energy, but recently he has been expanding his view to cover sustainability in general. While “sustainability” might not strike you as a key theme to draw from this latest Suez debacle, some of the solutions being designed to sustain food supply, have major implications for the security of said food supply. And as a result, it’s an investment theme with a lot of potential – I’ll let Kit explain…
Oi, you got the food?
By Kit Winder, UK Uncensored
In the phenomenon of cinematic excellence that was season 1 of Top Boy (BBC), drugs are referred to by the Summerhouse dealers as “food”.
Grown abroad, stuffed full of God-knows-what, wrapped in plastic and taken home in bags, there are a lot of comparisons between the international drug and food trades.
But what if I told you that the challenges faced by the various parties in the supply chain for drugs might be coming for your local supermarket before too long?
The feds are coming for your jackfruit
What if I told you that there are scientists growing pork belly in a lab, without nurturing a pig…
… engineering honey without bees…
… or producing milk without cows?
These are just some of the responses to the growing concerns around the food industry.
How can we feed a growing population with less space? Without exhausting natural resources? And with lower carbon emissions?
The food industry has started to respond to these questions, expanding plant-based protein options and increasing sustainability of farming and “aquaculture”, and improving supply chains and packaging. Consumers too, have become more concerned about food safety and the provenance of what they eat.
The products and practices that surround sustainable food collectively represent an enormous frontier growth market that is here to stay.
One exchange-traded fund (ETF) firm, Rize, has called it “one of the investment opportunities of the century”, alongside the electrification of vehicles and the rise of renewables.
I can’t put it any better than Rize:
With so many more people to feed, the focus has been forced away from nutrition and towards the supply of as many calories as possible for as little cost as possible.
This “economies of scale” approach has given rise to countless dire consequences.
Take the soaring use of inexpensive fossil fuels, mechanised agriculture, chemical fertilisers, food processing and unsustainable packaging practices as an example.
Ask any scientist, and they will tell you that all of these lead to nasty processes such as fertiliser run-off, nonpoint source pollution and greenhouse gas emissions that damage local, regional and even global ecosystems.
Companies everywhere are leaping into action to try and capture some of this fast-growing market.
You’ve heard of Beyond Meat and Impossible Foods most likely – food companies, right?
Well, it’s very interesting to note that Impossible Foods starts its Annual Impact Report with this statement:
To the outside world, Impossible Foods is a food company – but at its heart is an audacious yet realistic strategy to turn back the clock on climate change and stop the global collapse of biodiversity. Here’s how: If we could wave a magic wand and instantly make the animal-based food industry disappear, two game-changing, natural pathways for greenhouse gas reduction would turn on: methane decay, and biomass recovery.
Our World in Data estimates that food production is ultimately responsible for around a quarter of global greenhouse gas emissions.
This is split pretty evenly between land use, crop production, livestock and fisheries, and the supply chain.
Food production also places the majority of demand on our limited supplies of freshwater, a resource whose scarcity is only beginning to be understood.
We discovered what scarcity feels like in the first lockdown year.
Source: editor’s own photograph
Supply chains and consumer preferences
That photo was taken in my local supermarket’s meat aisle…
And, having shopped at the local butcher more during that period and beyond, I found myself asking some new questions.
For example, can it really be right that the costs of breeding, raising, feeding, killing, plucking and transporting a chicken can result in a price of only £3.50?
Given that butchers will charge a more authentic price, upwards of ten pounds, for what you imagine is a more free-range grass-fed variety of live animal… what corners have been cut in order to generate such cheap chicken?
The clothes retailer Boohoo has suffered a famous loss of business and investor confidence after very poor practices at its warehouses in Leicester.
The point is that supply chains matter.
Investors have always known this, but consumers are waking up to it in increasing numbers.
Over half of consumers (51%) now say they would be more likely to buy from a retailer that is transparent about where its products are sourced from.
When it comes to food, sustainability is the new zeitgeist.
For investors, this is part of a meaningful shift.
Renewables, electric vehicles, supply chain scrutiny, and the sustainability of food production.
It’s all connected.
Investors looking to deploy capital responsibly and sustainably can take note of these trends, as investors in the best incumbents or most exciting disrupters stand to profit from these seismic shifts.
It’s been true for the energy transition so far and will be true for the broader sustainability transition which is gathering pace.
All the best,
Boaz Shoshan
Editor, Capital & Conflict
PS The rise of renewables and the electrification of transport are two of the major themes my colleague James Allen has been focusing on in recent years – finding some almost ridiculously successful investment opportunities for his readers in the process. Recently, he’s begun investigating a new sector however: a smaller niche “sub-sector” that he anticipates will absorb the next big wave of green investment hitting the market. And he can show you how to get into it ahead of time here.
Category: Geopolitics